MFA Financial (MFA) Stock Squeezes Shorts

MFA Financial MFA Stock News

MFA Financial, Inc. (NYSE: MFA) is running for the top in the market this morning, trading on gains of more than 40% early on. The most recent news, announced yesterday, was that the company planned to revoke its dividend. So, why is the stock headed up?

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MFA Stock Short Squeeze Is Beginning

MFA Financial has all the makings of a short squeeze. The stock has seen a large rise in short interest over the last few weeks. Moreover, volume is generally pretty low. With this combination, the potential for a squeeze is hard to ignore.

That seems to be the case today. As the price of the stock ticked up in the premarket hours, those who did sell the stock short started to lose money. As such, these investors need to race to cover, which is market term for buy shares in order to cut losses. Ultimately, this is the making of a short squeeze.

So, what triggered the move?

Recently, MFA said that it was in discussions with lenders. Due to poor market conditions, the company’s lending costs have risen and it has been unable to meet some obligations. Nonetheless, as mentioned above, late yesterday, the company announced that it would revoke its dividend.

This means that the company will be able to keep more money in house in order to help it get through the COVID-19 crisis and the pain that the market has seen as a result. While it is painful for investors to hear that dividends have been revoked, it would be more painful if the company didn’t act quickly to cure its financial struggles.

So, in the case of MFA, the beginning of the gains seem to have taken place when investors realized that the lesser of two evils will likely be the case here.

Nonetheless, it’s worth keeping in mind that short squeezes often lead to gains in multiples. So, the run in MFA could be far from over.

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